In this episode of the Oil Tanker Talk podcast, we discuss the impact of the Iranian oil embargo on the world economy and the effect on the price of oil. We also talk about the impact on the Canadian oil industry of the embargo and how this could impact the rest of the world's oil supply and demand. Finally, we have a special guest on the show to talk about his career in the oil and gas industry.
00:03:09.080Quite frankly, we sold it to a lot of firms, and I did a couple of the sessions.
00:03:12.440So we used to get together and we used to ask these questions.
00:03:15.900What materials will impact your business the most if they go away?
00:03:20.440What labor impacts will occur if you had a strike?
00:03:25.660So we used to ask all these questions.
00:03:28.300And people, the executives from the firms, the C-suite, used to get together and they used to rank what they thought their biggest risks were.
00:03:37.900Now, straight or her moose, I'm going to jump forward a little bit.
00:03:40.860Canada, North America, the U.S., everyone, you know, we have oil reserves. So yeah, we should
00:03:49.480have spotted this as a weak point. If I'm in China, quite frankly, I had to think this was a
00:03:55.060huge weak point. And if I'm in all the other countries that are, a lot of them you just
00:04:00.600mentioned, that are now cutting prices and rationing and doing such, you had to think that
00:04:07.060somewhere around the government tables their ministers of energy were coming back to their
00:04:15.060cabinets and saying hey i think we might have a problem here yeah right i think this might be an
00:04:20.440issue so now i'm sitting there on the weekend i'm watching you know over easter i'm watching all
00:04:26.920these dots on the screen as they're showing the traffic in the street if you've had a chance to
00:04:31.760look at that you'll know what we mean if not you'll want to take a look at one of the traffic maps
00:04:36.460that show the tankers through the area,
00:06:27.540How would anyone in their right mind from any country who's pricing for its key resource not identify this as a risk and figure out a contingency plan?
00:06:38.000And how did any of these EU states, these Saudi states, how did they not figure out they should run another pipeline?
00:06:46.140At some point, you think, okay, I'm investing in these high-tech companies in the U.S.
00:07:04.120And under much protest from their own people, they built a very, what could be a very vibrant savior for them in the sense that they can actually bring and ship oil still.
00:07:19.180However, those routes are not, or if you're American, routes are not laid out yet as shipping lanes.
00:07:27.380So they will still have to arrange for new shipping lanes to new ports.
00:07:35.500How the hell did we ever end up in a position where somebody thought, oh, my goodness, okay, we've got basically 25 kilometers of straight that bends all over the place, full of rocks.
00:11:52.460you know honestly that'll be the that'll be the threat you know if you don't want to pay what i
00:11:56.640can get in the open market i'll ship it i'll put it on a tanker here and i'll ship it to another
00:12:01.080country so you know i'll make it'll make its way over to europe somewhere right now he's saying no
00:12:06.860tax cuts but he will consider doing rebates on things like groceries and fuel now let me just
00:12:14.880touch on groceries for a second if you're sending me a rebate on groceries now because of fuel and
00:12:21.620not before because of the greed of the grocery magnates i don't know what to say to you what
00:12:27.620what are you doing i think there's a double rebate associated with this maybe because we weren't doing
00:12:32.580it before why would you make it look like we're making groceries more available to canadians
00:12:37.460because we're offsetting the price of gas we needed that before this happened well and and
00:12:42.180this is always the one where if you make below this income you're going to get a rebate of x that
00:12:47.380That's right. I'm getting the rebate and you're not. So the rebate warning is that they won't fix the problem anyway. So he's even saying, I'm going to consider rebates, but it's not going to fix our problem long term.
00:13:01.420So even the even the prime minister's office is recognizing that no matter what we do at this moment, cutting taxes, doing rebate, none of it is going to be good for the country because we have to either print that money, allocate it from the budget from someplace else and cut it.
00:13:17.500Or we have to do something about pricing our own oil, which is an impossibility because it's priced through our neighbors south of the border.
00:13:25.640We're kind of in a position where many countries are not right now.
00:13:28.760if we did need help oh one last thing we've written legislation you might have heard of
00:13:34.380that is based on carbon right yeah the main reason why we're not doing it the main reason
00:13:41.440it's a liberal policy we can't go back on the policy that says we'll reduce the price
00:13:47.060of tax on gas because it will increase the use of carbon-based fuels yeah i don't know what to say
00:13:55.140that paul well i i don't know what to say either but quite frankly the opposition the official
00:14:01.300opposition uh pierre comes in and he says you know what my idea is to cut it by 45 cents to
00:14:08.640follow the other nations and reduce the gas tax fine where's the money going to come from so where
00:14:16.140so that you know that's fine i understand that that blows an enormous hole right in the heart
00:14:21.640of our nation well so then i said okay so 45 cents a liter it's interesting you know then this is
00:14:28.720political spin that sounds oh 45 cents a liter that'd be great yeah i'm happy with that that'll
00:14:34.920take i think i filled up on the weekend i filled my truck up it was empty it was 200 to fill my
00:14:40.400truck up oh my god so i filled my truck up so that'll take my fill of my truck back to like
00:14:46.340150 so save me 50 bucks oh yeah that's great right but what he doesn't tell you that's going
00:14:52.220to leave a hole guess what the hole is going to be 10 billion dollars so i went back and i took
00:14:58.220oh my god okay let's dig through so federally gas tax uh equates to about 5 billion annually
00:15:06.380provincially in ontario it's 2.4 billion quebec is 1.8 billion bc is 1.2 billion alberta is about
00:15:13.980point nine billion and all the other provinces and territories is one billion so roughly 10
00:15:19.720billion dollars so you got to find 10 billion dollars now we went through the budget show mike
00:15:24.900where are you going to find 10 billion dollars ukraine yeah i guess yeah i guess you could
00:15:32.360well there's half of it right there that's true you know we just did housing we just gave 8.8
00:15:37.680billion to housing so but yeah i guess you could but then you know you're right to your
00:15:43.800point there is no allocation for this is something that i think that we need to think about also from
00:15:48.780a risk uh analysis i love the risk analysis idea we need to do more of this yeah we should do one
00:15:54.720as a nation and give it to them why don't we we'll present one yeah but uh what occurs to me is that
00:16:01.200the risk analysis has not included we might have a rainy day we might have a problem politically
00:16:08.280in the world we don't have any means of fortifying ourselves because we don't have any production
00:16:14.640because we don't manufacture because we don't have an export product that makes a huge amount
00:16:19.300of money because we don't tap our resources because we sold petro canada yeah there's there's
00:16:24.700a trillion dollars potentially right there yeah because we sold a company that actually
00:16:28.780We drilled and refined our major resource.
00:16:36.140Yeah, and made it possible for us to have gas
00:16:38.420at an incredible price and still make money.
00:16:58.080Right. And quite frankly, we wouldn't be stalling giving, you know, we're not doing our budgeting now till the fall again. We wouldn't be deferring our budgeting process, trying to wait to see what the US was going to do and what everyone else was going to do. We'd be taking some money out of that reserve fund, using that to offset the $10 billion loss and give us a couple years to carry on.
00:17:21.580And, you know, quite frankly, I think that company Equinor on previous shows was doing about $20 to $30 billion a year in net income.
00:17:30.920So quite frankly, we wouldn't even have to dig into the reserves, Mike.
00:17:34.140We could actually live off the money that that company makes to pay off and reduce our gas, which probably, to tell you the truth, we probably never would have had gas tax.
00:17:46.960We would have never had gas tax because we would have started the company to produce our own gas, to reduce it.
00:17:52.180But these are just policy decisions we keep making when it comes to oil that are horrifically bad, that politicians based on four-year terms make for votes.
00:18:07.200You know, I'm sure Mulroney thought, I'm sure Mulroney thought, oh, this is great.
00:18:11.940You know, Petro Canada is a bloated fat agency and I can sell it off and use that to reduce a bunch of money at the time so I can make another term.
00:18:21.400I'm sure that's what they thought. Yeah. Yeah. Good long term decision. Absolutely not.
00:18:26.660I think they thought it was going to affect the commodities market and in our favor and drive the price and value of the company up at the time.
00:18:33.500And it didn't. It just made it look like we were abandoning the world and leaving all these projects behind.
00:19:14.400And he can't hide behind the war, he can't hide behind COVID this time.
00:19:19.080We need to be aware of what the government is doing at all times through this,
00:19:22.760because otherwise we're going to hear that it was caused by outside problems,
00:19:28.180and we will never address the inside issues.
00:19:31.080Sure, it was the tariffs, and now it's gas prices based on Iran,
00:19:37.260and what's next you know we just keep going there will be something next there will be something
00:19:42.280next but you know reducing the gas tax it's an option but it's not a long-term option it's a
00:19:49.060short term we can't fill that hole we can't move forward with that happening so the the answer is
00:19:54.900what do we do now and the with respect to gas we need to go back and we look at need to look at a
00:20:00.960model where we refine for our own nation we need to get back into the oil business i've said this
00:20:07.040on previous shows and i know people like oh you know i can't believe we're going to do that again
00:20:11.500what has government ever done efficiently well i tell you what government did a lot uh really
00:20:17.800efficiently efficiently back then they did a tremendous amount of things they built a company
00:20:23.120that was actually uh world renowned that was out there doing other projects and other nations on
00:20:31.440the oil and gas side it lit up the north sea yeah or we wouldn't even be there looking for gas
00:20:36.920But now we've sold it off. We're totally dependent on Canadian and U.S. firms to come in and take our oil and use it for whatever they want to use it.
00:20:46.400We're dependent on the pricing models that aren't even in our own country when the natural resource comes from here.
00:20:54.220Yeah, I don't know. We're stuck in the Strait of Hormuz for some reason, but the truth is we're stuck in our own mud right here.
00:21:00.380Exactly. The straight of her moves is, honestly, I call squirrel, you know, because quite frankly, that's what we're doing. We're looking over there. We're not addressing the issue we have. We should sit down and talk about it. And that's something, quite frankly, Kuzma's coming up. I know we don't talk about it. And I know because of Alberta and their rumblings and everything going on down there, we don't want to talk about this issue. We have to talk about this issue. We have to get into this issue. We got to de-layer it. We got to find out why.
00:21:28.260We got to figure out how to make Alberta happier so they can find their way.
00:21:34.420But quite frankly, we also have to go back to Alberta and we have to say, listen, I know you have a bunch of U.S. companies, a bunch of U.S. influences there.
00:21:41.900We need to sit down and talk to them about what our trading relationship is going forward that ties to the big ball of wax.
00:21:47.980because now with i with iran uh potentially tomorrow you know we talked about another show
00:21:54.600uh going away and the u.s having to retreat if they don't go forward with what they're saying
00:21:59.620we are a bigger trading partner now we're more essential to the success of the united states
00:22:05.780we need to open up our market we need to be prepared to open up our market i don't know
00:22:10.040where the money comes from to build that infrastructure but if we don't do it this
00:22:14.040time if we don't do it now when the hell are we going to do it well and you know we can't keep
00:22:20.240slipping one of the things that we we could have done right now which if we were in the right
00:22:25.000situation if we would have kept petro canada we would have been a unique opportunity to reduce
00:22:30.160our production costs so when the rest of the world was going up in gas prices and increasing
00:22:34.620the prices of their goods and services we could have went the other way and got a competitive
00:22:39.660advantage which then would have helped us in our lagging productivity listen it's no it's no lie
00:22:45.180we are 30 to 40 percent less efficient productivity wise we are less productive than americans by a
00:22:51.420long we are slipping out of the developed nations when it comes to output per labor or per hour
00:22:57.900with respect to productivity we're number i think we're number 32 out of 32 right now and we're
00:23:03.900estimated to fall out of the developed nations by 2030 yeah so like would have been a great
00:23:11.620opportunity now to take advantage of this opportunity you're only going to get something
00:23:15.900like this so many times in a lifetime we could have leapt ahead and figured out a way to to at
00:23:22.140least become uh more productive and get goods into into marketplaces that we don't currently
00:23:28.600get them don't rebate rethink exactly that's what we need an entire retool exactly go back to each
00:23:35.880of your markets figure out a way don't give the rebate to the people i know people are going to
00:23:40.600boo but you know what those are short-term solutions find a way to give the rebates to the
00:23:46.920the industries that need them to get more productive and reduce their cost to get to market
00:23:53.720and then you have a strategy that's where we should be but i don't think we're there the
00:23:57.320The problem is, you know, we have this conversation, the 45 cents comes up, he discounts it.
00:24:05.600No one goes away and puts this strategy together.
00:24:07.440And that's why in the next few days, whatever happens in the world, whatever happens with oil, is going to cause a real big rethink on this.
00:24:16.220I really think we should have Mark Carney come in and explain this to us.